Car Insurance Market Value or Agreed Value – What’s the Difference?

A quick explanation of the difference between agreed value and market value, and what might be appropriate for your car.

If you’ve recently applied for an online car insurance quote, you’ll probably know that auto insurance can be both complicated and confusing. And what about the actual process of obtaining a quote? Should you get a quote for agreed value, or market value? What’s the difference between the two? Here, we will attempt to answer those very questions.

Car Insurance: The difference between agreed value and market value

What is market value car insurance?

Market value is a recognised industry term for what your car would fetch on the open market, as is. It is not, say, the trade-in value, nor what an unusual purchaser, such as a collector, would pay for your car. It’s not the cost of replacing your existing car with a brand new one.

So if you insure your car for market value, the price you will receive from the insurer in the event that your car is written off will be the price that your insurer estimates your car was worth just before the accident.

What is agreed value car insurance?

Agreed value is a sum that has been fixed after discussion and agreement between the insurer and the individual taking out the policy. People who bought a car using a car loan might decide to insure it for an agreed value while they still have finance owing on it.

Under an agreed value car insurance policy, you can expect to pay higher car insurance premiums if the agreed value is higher than what the car would sell at on the market (market value).

Market Value Car Insurance

Amount is based on what your car is worth for resale just before the accident/incident

Premiums could tend to be lower than insuring your car for a high agreed value

There is a level of uncertainty about what compensation you will receive from your insurer if your car is written off

There is no flexibility around the amount that your car is insured for

Agreed Value Car Insurance

Amount is based (within reason) on the amount that you want to insure your car for

Premiums could tend to be higher than insuring your car for a market value

Agreed value provides certainty about what compensation you will receive from your insurer if your car is written off. This is particularly useful if you have a car loan or other form of finance

There is flexibility around the amount that your car is insured for

Our Best Market Value Car Insurance Policies

This table has been formulated for a 30-39 year old male living in New South Wales who does not require an extra driver under 25. It is sorted by star rating.

How does my car insurance value affect my claim?

If your car is “written off” or stolen, the difference between agreed value and market value car insurance becomes apparent.

Let’s look at some “what if” scenarios. Let’s say you bought a two-year-old car for $30,000 (its new price was $50,000) and insured it for the agreed value of what you paid for the car.

If your car was stolen soon after, your insurer would pay you the $30,000 figure, as the period of new car replacement would be over and your compensation would be limited to the agreed upon amount.

If you insured the exact same car for market value under the same scenario, the insurer would be likely to pay out a lot less than the purchase price of $30,000. The reason for this is that depreciation kicks in as soon as you purchase the car, and gets to work quickly. Your car is subsequently worth less and less every day, meaning that the amount your car is insured for under a market value agreement also reduces every day.

Think about car replacement cost

The question you need to think about when considering market value versus agreed value car insurance is this; would the reduced amount you’d get on a market value policy be enough to replace your lost vehicle? Admittedly, you would have made a saving on your yearly premium by choosing the cheaper policy, but is it worth it? For some people it will be, for others it won’t.

Of course, this does not apply to vintage, classic or limited-edition cars which will generally be insured through specialty companies.

In short, whether you should go with market value or agreed value car insurance will boil down to two things: the car you drive and how much you want to spend on premiums. If your car is reasonably modern and you’d want to have enough to replace it in the event of an accident, you might be better off settling on an agreed value which you think will be necessary to replace your value. However if your car is closer to retirement age and not worth a great deal to you, you may decide that you don’t want to pay a higher premium attached to an agreed value car insurance policy.

If you are currently comparing car insurance quotes, check out our snapshot of current policies available in the table below with links direct to the providers website. Please note that this table has been formulated for a 25 -29 year old male in NSW and is sorted by star rating.

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This advice is general and has not taken into account your objectives, financial situation, or needs. Consider whether this advice is right for you. Consider the product disclosure statement (PDS) before making any financial decision. For more information, read Canstar’s Financial Services Guide (FSG).

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This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you. Consider the product disclosure statement before making a purchase decision. Canstar provides an information service. It is not a credit provider, and in giving you information about credit products Canstar is not making any suggestion or recommendation to you about a particular credit product. Statistics referenced on this page have been verified by Canstar Research. Research provided by Canstar Research AFSL and Australian Credit Licence No. 437917.